Offshore outsourcing of innovation by SMEs: a 4F perspective of governance

Chandrasekararao Seepana, Ahmad Khraishi, Antony Paulraj, Fahian Huq

Research output: Contribution to journalArticle (Academic Journal)peer-review

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Abstract

Purpose
This study aims to investigate how contract complexity and relational trust could impact offshore outsourcing innovation (OOI) performance of small and medium enterprises (SMEs). This study further examines the moderating effects of knowledge routines and joint actions on the relationships between contract complexity, as well as relational trust and OOI performance.

Design/methodology/approach
The empirical investigation extends transaction cost economics and the relational view of buyer-supplier dyads in the context of offshore outsourcing SMEs. To test the hypotheses, the authors collected and analysed survey data from 200 European manufacturing SMEs that have existing offshore supplier relationships.

Findings
The results suggest that both complex contracts and relational trust as governance structures positively affect SMEs’ OOI performance. Additionally, while both formal knowledge routines and joint actions help strengthen the relationship between complex contracts and OOI, they showed no significant moderating effect on the relationship between relational trust and OOI. Furthermore, based on the results, the authors also develop a governance framework covering four configurations – fit, firm, flexible and fragile (4F).

Originality/value
The 4F governance scenarios – fit, firm, flexible and fragile – introduced in this study emphasise the need for a combination of contract complexity and relational trust mechanisms in OOI relationships. The 4F labelling has rich implications for practitioners on how interfirm outsourcing innovation relationships can be managed based on configurations of contractual and relational governance. The study also adds to the understanding of how SMEs’ specific characteristics (e.g. resource shortcomings and flexibility) may influence their OOI decisions in comparison with large firms.
Original languageEnglish
Pages (from-to)663-680
Number of pages18
JournalSupply Chain Management
Volume27
Issue number5
Early online date12 Jul 2021
DOIs
Publication statusPublished - 5 Jul 2022

Bibliographical note

Publisher Copyright:
© 2021, Emerald Publishing Limited.

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